equitable assignment trust

Equitable Assignment: Everything You Need to Know

An equitable assignment is one that does not fulfill the statutory criteria for a legal assignment, but is binding and upheld by the courts in the interest of equability, justice, and fairness. 3 min read

An equitable assignment is one that does not fulfill the statutory criteria for a legal assignment, but is binding and upheld by the courts in the interest of equability, justice, and fairness.

Equitable Assignment

An equitable assignment may not appear to be self-evident by the law's standard, but it presents the assignee with a title that is protected and recognized in equity. It's based on the essence of a declaration of trust; specifically, essential fairness and natural justice. As long as there is valuable consideration involved, it does not matter if a formal agreement is signed. There needs to be some sort of intent displayed from one party to assign and the other party to receive.

The evaluation of a righteous equitable assignment is completed by determining if a debtor would rationally pay the debt to another party alleging to be the assignee. Equitable assignments can be created by:

• The assignor informing the assignee that they transferred a right to them
• The assignor instructing the other party to release their obligation from the assignee and place it instead on the assignor

The only part of an agreement that can be assigned is the benefit. Generally speaking, there is no prerequisite for the written notice to be received or given. The significant characteristic that separates an equitable assignment from a legal assignment is that most of the time, an equitable assignee may not take action against a third party. Instead, it must rely on the guidelines governing equitable assignments. In other words, the equitable assignee must team up with the assignor to take action.

The Doctrine of Equitable Assignment in Wisconsin

In Dow Family LLC v. PHH Mortgage Corp ., the Wisconsin Supreme Court issued in favor of the doctrine of equitable assignment. The case was similar to many other foreclosure cases, except this one came with a twist. Essentially, Dow Family LLC purchased a property and the property owner insisted the mortgage on the property had been paid off. However, in actuality, it wasn't. 

Prior to the sale, the mortgage on the property was with PHH Mortgage Corp. When PHH went to foreclose on the mortgage, Dow Family LLC contested it. There was one specific rebuttal that caught the attention of the Wisconsin Supreme Court. The official mortgage on record was with MERS, an appointee for the original lender, U.S. Bank.

Dow argued that PHH couldn't foreclose on the property because the true owner was MERS. Essentially, Dow was stating that the mortgage was never assigned to PHH. Based on this argument, PHH utilized the doctrine of equitable assignment.

Based on a case from 1859, Croft v. Bunster, the court determined that the security for a note is equitably assigned when the note is assigned without a need for an independent, written assignment. Additionally, Dow contended that the statute of frauds prohibits the utilization of the doctrine, mainly because it claimed every assignment on a property must be formally recorded.

During the case, Dow argued that the MERS system, which stored the data regarding the mortgage, was fundamentally flawed. According to the court, the statute of frauds was satisfied because the equitable assignment was in accordance with the operation of law. Most importantly, the court avoided all consideration regarding the MERS system, concluding it was not significant in their decision. 

The outcome was a major win for lenders, as they were relying on the doctrine specifically for these types of circumstances.

Most experts agree that this outcome makes sense in the current mortgage-lending environment. This is due to the fact that it is still quite common for mortgages to be bundled up into mortgage-backed securities and sold on the secondary market.

Many economists claim that by not requiring mortgages to be recorded each time a transfer is completed, the loans are more easily marketed to investors. Additionally, debtors know who their current mortgage company is because the new lender must always notify the current borrower in order to receive payment. It was determined that recording and documenting the mortgage merely provides a signal to the rest of the world that the property owner secures a debt.

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What Is an Equitable Assignment?

An equitable assignment is a transfer of future interest that doesn’t fully meet legal standards, but will still be honored by courts. This is an example of a situation covered by equity, or fairness, rather than specific legal doctrine. Courts will enforce such agreements when they are not covered by existing laws, as long as they appear reasonable, fair, and without coercion. The standards for an equitable assignment to pass court scrutiny can depend on the region and the situation.

In such assignments, people can reassign future income in several different ways. One option can be to transfer interest, like part of a trust, to another person; the trust is guaranteed income, but the assignor waives the right to it, allowing the assignee to benefit from it. Another way to perform an equitable assignment is to have third parties transfer anticipated payments to the assignee. In all cases, the transfer involves future income or benefits, not current ones.

Expectations do not count as an equitable assignment. If a child believes she will inherit her father’s house, for example, she cannot transfer her interest in the house to another party. This is because the inheritance is an expectation, not a guarantee. In the event she does not inherit the house, the person she transferred the interest to has no recourse. Thus, someone cannot ask to have a debt written off in exchange for a future expectation.

Due consideration also needs to be part of an equitable assignment transaction to prevent fraud and ensure a transaction is legitimate. In the example of assigning rights to a trust, for instance, the assignor would need to receive something in exchange. That might be a bulk payment to buy the right to proceeds from the trust later. If due consideration is not present, the court may not uphold the agreement, on the grounds that it could be suspect. A special concern can be attempts to transfer rights to future earnings for the purpose of avoiding tax liability , in which case the assignee might be planning to transfer the funds back or allow the assignor to use them.

Specific legal standards for equitable assignments can depend on the nation. People with concerns can consult an attorney for advice in these situations. Attorneys with expertise in this area are familiar with actions in equity courts and can determine whether a transaction is likely to hold up in court.

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a MyLawQuestions researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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Equitable assignment

Practical law uk glossary 2-107-6540  (approx. 3 pages).

• The assignor can inform the assignee that he transfers a right or rights to him.
• The assignor can instruct the other party or parties to the agreement to discharge their obligation to the assignee instead of the assignor.
• General Contract and Boilerplate
• Breach of Lease Covenants
• Security and Quasi Security

What is the significance of an equitable assignment in the context of the assignment of future rights under a contract (or a chose in action)?

An assignment is the transfer of a right or an interest vested in one party (assignor) to another party (assignee). The effect of a valid assignment is to entitle the assignee to demand performance of a contractual obligation.

Assignments may be legal or equitable.

A legal assignment is one which meets the requirements set out in section 136(1) of the Law of Property Act 1925 (LPA 1925). It must be:

absolute and unconditional and not purport to be by way of charge only

made in writing and signed by the assignor

expressly notified in writing to the obligor

Equitable assignments may arise in the following circumstances:

where there is an intention to assign, but not all of the formalities of a

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Key definition:

Equitable assignment definition, what does equitable assignment mean.

Assignments can occur in equity when any of the requirements of legal assignment are not satisfied.

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What is Equitable Interest? Common Equitable Interest Examples

What is equitable interest.

An equitable interest is defined as “an interest held by virtue of an equitable title (a title that denotes a beneficial interest in the property and allows the possessor the right to obtain formal legal ownership) or claimed on equitable grounds, such as a trust beneficiary’s interest.”

A right in equity that can be protected by an equitable remedy is known as an equitable interest.

Only in systems affected by the common law (connotation 2) heritage, such as New Zealand, England, Canada, Australia, and the United States, can this idea exist.

Common Equitable Interest Examples

Equitable rights to a property do not confer the same rights as legal ownership to the property. Courts, on the other hand, recognize these interests because ‘it is right and fair to do so.’

Equitable title does not transmit legal ownership of the property; rather, it grants the individual or entity the right to use and enjoy the property. These are some common instances of this type of interest:

• The interest of a beneficiary in a fixed trust
• The interest of a partner in the partnership
• Proprietary interests that are common law interests’ equivalents
• Security interests that are equitable
• Land rights that are equitable

Mary and Gustav formed a partnership and bought an investment property. Although Mary contributed 50% of the purchase price, the legal title is in Gustav’s name.

Although Mary is not the legal owner of the property, she has an enforceable equitable interest in it.

What exactly is Equitable tittle?

Equitable title refers to the ability to use and enjoy the property but is not synonymous with “real ownership.”

In court, anyone with equitable ownership could not claim to be the legal owner or possession of the property.

This necessitates the acquisition of a legal title. Having equitable title, on the other hand, gives the person greater consistent authority over the property.

Because someone with equitable title has the rights to “benefit from” and “enjoy” the property, this often comes with the obligation to finance it.

Furthermore, equitable title grants the holder the right to gain formal legal ownership as well as access to the property.

When purchasing any property, it is critical to get both equitable and legal ownership. This includes the right to eventual full ownership and property interest.

Equitable title establishes a person’s financial interest in a piece of property. This is why a property investor can hold equitable title and list a property even if legal title does not exist.

However, they are unable to sell the property.

Legal Title

Before we can understand what, an equitable interest is, we must first understand why it can arise. Equitable interests arise when there is an interest in a property but the party with the interest does not have legal title.

Legal title is the genuine and enforceable ownership of a property. Except in the case of an equitable interest, this cannot be easily overridden.

A legal title entails numerous responsibilities, such as the upkeep, use, and ownership of real estate. A common example of this is the Torrens title system of land ownership, in which a legal interest is registered on the title of the property.

Although this type of ownership appears to be absolute, there are some circumstances in which it can be challenged. This is known as an ‘equitable interest.’

Equitable interest vs legal interest

Despite the fact that they both represent a sense of ownership over an asset, legal interest and equitable interest are not the same thing.

When a person has legal interest in an asset, he has ownership and can legally enforce his rights over the asset. When a person has equitable interest in an asset, he or she can use it without legally owning it.

The following example demonstrates the distinctions between equitable and legal interest.

Amy has agreed to buy a house from Daniel under a contract that states that Amy (the buyer) will pay the price of the house in installments and that once the price is paid in full, Daniel (the seller) will transfer the deed to Amy.

In this scenario, Amy has an equitable interest in the house because she can live in it and enjoy it but does not have legal title to it. Daniel will retain legal ownership of the house until Amy pays the balance in full, at which point legal ownership will be transferred to Amy.

Amy can benefit if the property’s value has increased between the time the agreement was drafted and the time the last installment was made.

However, if the property’s value falls, she will suffer a loss.

The equitable interest differs from the legal interest in two important ways:

A legal title can be conveyed from one person or entity to another. In this case, both parties must sign documents and pay fees in order to complete the transfer. This is a relatively quick and simple process.

A legal title cannot be challenged by the law. If a property owner does not prove their ownership, then they have no legal title to the property at all. This means that anyone can take possession of the property.

How Equitable Interest impacts who can sell the property

People frequently come into contact with equitable interest because someone is selling a property that they do not own.

These listings will most likely be on a local listing website rather than the MLS, but the issue of ownership remains.

It is frequently true that only the owner of a property can sell it unless you have an equitable stake in it.

In these circumstances, the seller’s equitable interest will be derived from one of several sources:

• Purchase and sell agreement
• A contract with an option
• A deed contracts
• A lease option agreement
• A letter of permission for a short sale

When you come across someone listing a property that they do not legally own, you are most likely dealing with a wholesaler.

A property is normally sold by a wholesaler once a buy and sale agreement is signed.

Instead of purchasing the property outright, they can become the equitable interest holder and advertise it.

When a prospective buyer agrees to sign a purchase and sale agreement, the investor signs it as the seller.

The contract will include a clause stating that the sale is conditional on his purchase of the property.

The investor can sometimes assign his initial purchase contract with the seller to the investor’s end-buyer, and the end-buyer really closes by taking over the investor’s duty for the original contract.

The property will eventually be purchased by the end-user, and the distributor will earn an assignment fee. Remember that, unlike realtors, investors do not receive a commission.

Rather, they work to find buyers through marketing efforts, and having equitable interest aids them in this endeavor.

Purchasing properties, taking a financial risk, and selling them to buyers pays off in the long run. Throughout this process, many investors also rehab and transform neighborhoods.

Situations where Equitable and Legal tittle interact

Ownership rules vary depending on where you live. According to the deed, the property seller is not necessarily the legal holder of the piece of real land. The law may permit two parties to have different equitable and legal titles.

A land contract is one example of a situation in which legal and equitable title is shared. In this situation, the seller gives finance to the buyer in the form of a payment plan.

Instead of recording a deed transferring title to the buyer, the seller will execute a contract with the buyer stating the payment terms and the rights of both parties.

For the length of the contract, the seller will retain legal title, but the buyer will have equitable title.

That is, the buyer has the right to acquire the property as well as the obligation to maintain it. At the end of the loan period, the deed will transfer full title to the buyer, giving them legal and equitable title.

Another prominent instance in which legal and equitable title intersect is while dealing with a trust.

A trust is a legal structure in which one party (the trustee) holds property on behalf of another party (the beneficiary). In this situation, an individual will purchase a home and then register a deed giving legal title to their trust.

The trust documents, which specify the identification of the trustee and beneficiary, govern the terms of the trust. Typically, the property owner will name themselves as the beneficiary, but they may also name a child or another family member.

They may also choose to serve as trustees themselves or appoint a third party.

When the property is transferred to the trust, the trustee becomes the legal owner and has the right to sell it (subject to the terms of the trust) as well as the obligation to maintain it and defend it in court if necessary.

The beneficiary, on the other hand, has a beneficial interest in the trust (i.e., equitable title), which includes rights to the profits and income generated by the trust’s property.

Trusts are used because transferring legal title upon the death of a trustee is easier with a trust than when legal title is held by an individual. This is because the probate process can be avoided when trust is involved.

Types of Equitable Interests

Latec Investments Ltd v Hotel Terrigal Pty Ltd indicates that there are three types of equitable interests in New South Wales:

• Equitable interest- An equitable interest is a right in property that does not go through the legal title process. This is similar to how a leasehold operates, with the exception of conveyance.
• Mere equity- A mere equity is a way to acquire a property while avoiding the cost of conveyance. This is often done by entering into a contract that conveys an interest in land but which does not grant any legal title.
• Personal equity- This is a possessory interest in property that is not based on legal title. This can include an equitable interest or a mere equity.

For example, pure equity may develop when one party has been unfairly harmed as a result of the outrageous behavior of another.

According to the law established in Lysaght v Edwards, a valid contract for sale confers an equitable interest on the purchaser of the land. In Walsh v Lonsdale, it was also stated that “justice looks on as done that which ought to be done.”

A contract that does not meet the requirements of a deed as required by section 52 of the Law of Property Act of 1925 may be specifically enforced to convey the equitable interest to the new purchaser.

This rule has had a significant impact because it allows interests that were not conveyed by a deed to still be binding on future purchasers under the doctrine of constructive notice.

However, the Law of Property (Miscellaneous Provisions) Act 1989 s.2, which requires all contracts for the sale of land (which could be specifically enforceable) to be in writing, contain all the conditions of the agreement, and be signed by both parties, has lessened the impact of this regulation.

Contracts that are not in writing and signed by both parties cannot be specifically enforced and, as a result, do not create or transfer an equitable interest inland.

Equitable interest in partnership

In summary, the High Court confirms that a partner’s interest in partnership property prior to the dissolution of the partnership is an equitable interest under a unique trust, as opposed to a fixed trust.

What is Equitable interest?

Equitable interest deals with rights that may exist in a property that are not based on legal title.

What is a mere equity?

A mere equity is similar to an equitable interest, except that it has no connection to a legal right.

Generally, an individual will be able to acquire a property and then register a deed giving themselves legal title. Or, they will enter into another contract that conveys an interest in the land but does not convey any legal title.

Pure equity exists when one party has been unfairly harmed as a result of another’s outrageous or malicious behavior.

When do you get a personal equity?

A personal equity is a possessory interest in property that does not have any basis in legal title. This can include a mere equity or an equitable interest.

How do you get equitable interest?

It is a general term that refers to an interest established on fairness principles rather than a formal legal assignment of ownership. This form of interest is usually superseded by legal ownership. The Court is the sole means to have an equitable interest enforced.

What is a reversionary estate?

In the context of real estate or wills and estates, a reversionary interest is a reservation created in a real estate conveyance that the property will revert back to the original owner upon the occurrence of a certain event.

What are the two elements of an equitable interest?

An equitable interest is created when one party makes a deal with another to transfer property on certain terms. This agreement involves two major components:

• The Nature of the Property Interest; and
• The Terms of the Agreement.

What is the difference between equitable interest and legal interest?

Equitable interest is an interest in a property that is not based upon legal title.

Legal interest, on the other hand, refers to an individual’s claim to a property by virtue of their legal ownership of it.

For example, a vendor may have legal title over a piece of land, but they may also have an equitable interest in it as well.

A court order stating that the specific piece of land should be conveyed to one person is considered a conveyance order.

What is an equitable interest example?

Equitable interest is a broad phrase that refers to an interest that is established via principles of justice rather than a legal assignment of ownership. A trust beneficiary’s equitable stake is one example.

What are equitable rights and interests?

An equitable right is a legal right guaranteed by equity, as opposed to a legal right derived from a legal source. An example of an equitable right can be found in Land law, where a beneficial interest, i.e., vested interests in an estate that are protected by equity, is mentioned.

What is equitable title?

Equitable title is a type of ownership that does not necessarily involve the legal ownership of property, but rather the possessor of the property has been granted some sort of rights to it.

Can equitable interests be registered?

HM Land Registry only registers legal estates, and the proprietor is listed as the owner of a legal estate. The register documents the legal estate in the property, not the underlying ownership (the ‘equitable’ or ‘beneficial’ interests).

What is an equitable proprietary interest?

An equitable proprietary interest is a form of personal right in land that is not based on legal title.

What is an equitable remuneration right?

Equitable remuneration rights are a type of right in land that are not based on legal title, but rather upon the holder of the interest having a beneficial interest in the property.

What is an affidavit of equitable interest?

An affidavit of equitable interest is a sworn statement that contains the details of any equitable interest that you may have acquired in a property.

The affidavit must be signed by the individual who declares that they have acquired an interest in it and also attests to their knowledge about its existence. The document must be registered with a legal or official body, such as the Land Registry Office, before it becomes effective.

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Assignment of Choses in Action

Property generally may be realty (real) or personalty (personal). Realty are characterized by geographical fixity(land) while personalty are generally mobile.

Personalty is also classified into tangible/corporeal and intangible/incorporeal. The former is capable of physical handling/possession/manipulation/enjoyment while the latter is incapable of any of these.

Incorporeal property is also called a chose in action which has been defined as a legal expression used to describe all personal rights of property which can only be claimed or enforced by action (in a court) and not by taking physical possession.

A chose generally is a thing capable of being owned. Choses in action may be legal or equitable. Legal choses in action are rights which were enforceable or recoverable only by an action at Common law. This category of choses includes debts, benefits under a contract, insurance policies, copyrights, patents etc.

Equitable choses on the other hand are rights over property which were only enforceable/recoverable/cognizable by the courts of Chancery. It could only be recovered by a suit in Equity and the rights under this category include interests of a beneficiary in a Trust, a legacy/reversionary interest under a will etc.

Choses in action may also be in respect of already existing things/property or things/property to be acquired at a future date but which are not yet in possession. The chose in action may be property in itself and it may also be a propriety right over property.

Assignment is the transfer of something from one person to another such that the assignee obtains rights of a nature that were hitherto exercisable only by the assignor. An assignment of a chose is thus the transfer of a chose in action from the assignor to the assignee such that the assignee obtains and becomes entitled to enjoy rights in respect of that chose, which were hitherto exclusively enjoyed by the assignor.

Assignment may be legal (statutory) or equitable.

Assignment and Novation

An assignment is quite distinct from a novation. Novation is essentially a legal device by which parties to a contract may legally vary/shift their obligations under the contract to third parties. Thus, A can agree with B, his creditor, that C, who owes him money, will pay that debt to B in full satisfaction of his own (A’s) debt.

Novation is however fundamentally different from assignment in three material aspects:

• The consent of the parties is sine qua non since the original contract is rescinded by the novation. There must thus be consensus ad idem. There can be no novation otherwise. This is contrary to the case in assignment where there only need be communication to the assignee, his consent and that of the trustee of the liability are immaterial.
• The original debt in novation must be totally extinguished under the new arrangement.

There is no such requirement for assignment to be valid.

• For novation to be valid, there must be consideration in all cases as it is essentially a new contract. The requirement for consideration in assignment is much more relaxed.

Assignment and Equities

The general rule as regards assignment of choses in action is that an assignee takes, subject to the equities thar already apply to the chose in action (property) in question. Thus, anyone who has an interest (legal or equitable) in an assigned chose is entitled to a higher priority than that of the assignee.

The logic here is based on a recognition that the assignee cannot acquire a better title than that of the assignor. What he essentially gains by virtue of the assignment is a right to continue in the stead of the assignor in respect of that chose and nothing better.

In Re Knapman (1881) 18 Ch. D 300 the beneficiaries of a will brought an action against the executor seeking to revoke the probate. While the matter was in court, these beneficiaries assigned the right under the will to someone else.

Their action subsequently failed in court, the court ruled that the executor had a right to set off the costs of the suit against the estate. As such, since the right to this had already been assigned, the assignee has to settle this cost since he was assigned a property that had a pre-existing liability.

Claims of equities that arise after notice of the assignment has been given to the trustee would not affect the assignee however, except where the claim is very closely related to the original transaction upon which the chose came into existence.

The rule that the assignee takes subject to equities will not apply where the trustee is estopped, either by conduct or deed, from setting up equities against the assignee. It would not also apply where the agreement occasioning the original transaction includes a clause that the assignees of the assignor would take free from all equities.

Historically, assignment of choses in action was largely unrecognized at Common law. There was the fear that allowing such assignment would bring about Maintenance and even cases of Champerty as well as the risk of encouraging a litany of contentious matters on the same res.

Maintenance arises where a person who has no legal interest in a matter provides assistance by money or otherwise to a party to the suit while Champerty marries the foregoing with the prospect of reward out of the possible spoils of the suit.

Thus, no debt could be assigned at Common law unless the debtor specifically agreed to the assignment. The only exceptions allowed by Common law were in respect of choses in action assigned by or to the King and assignment of negotiable instruments in order to promote trade.

Equity has however always recognized the assignment of choses in action, both equitable and legal. It would not however allow the assignment of bare rights without accompanying interest in property. This was to avoid, as in the case of the Common law, situations that encourage Maintenance.

Assignability

Not all choses in action are assignable. The courts would not give effect to such assignments either on grounds of public policy or on account of the nature of the subject matter of the assignment.

Choses in action that are not assignable include:

• Salaries of public officials. This is because it is perceived that if allowed to assign their salaries, they may deprive themselves of their means of sustenance and thereby impair the efficiency which is most desirable for the public service.
• Alimony is not assignable on much the same grounds as salaries of public officials as the money is meant for the maintenance of the spouse.
• Rights arising out of a contract of a personal nature i.e. contracts that require personal service like employment.
• Expectancies (future choses) are not assignable at Common law based on the maxim: Nemo dat quod non habet. They are assignable in Equity although, such assignment must be for value.

Equitable Assignment

An equitable assignment is of a flexible nature. This flexibility makes it quite distinct from legal assignments as they do not require all of the formality required under the law. It may be in respect of a legal or equitable chose. Thus, there may be an equitable assignment of an equitable chose or an equitable assignment of a legal chose.

While there is no strict formality required for equitable assignments, certain criteria are instructive as to whether it would be considered valid or not.

For an equitable assignment to be considered as having been effected, there must be a clear intent to assign. While Equity does not require that the assignment be in writing or made in any particular format, there must be a clearly deducible intent to assign on the part of the assignor.

The intent to assign here will be construed from the words used and the particular circumstances of the case. If what is construed is a mere mandate/authority to hold onto certain property, no intent to assign may be ascribed by the court.

The position that Equity does not require writing for equitable assignments has however been affected by S. 9 of the Statute of Frauds and S. 78(1)(c) of the Property and Conveyancing Law which require that the assignment of any equitable interest or trust must be in writing.

The assignment is also required to be communicated to the assignee. Although, the assignee may still take in certain instances even without communication, subject to the right of the assignee to repudiate the transfer when he becomes aware of it.

The particular chose intended to be assigned must be identified. It is insufficient to give a vague representation of what is sought to be assigned. Such vagueness may impair the court’s construction of an intent to assign in such circumstance.

Consideration in equitable assignment depends on the circumstance. Where the assignment is complete in the sense that there is nothing left for the assignor to do to perfect the assignee’s title, there would be no need for consideration.

If it is incomplete though, consideration may be required. Consideration will also be required where the assignment concerns some future chose as the agreement in such instance can only be a contract to assign and all contracts must be backed by consideration.

No consideration is however required for assignment of existing choses.

There is no real requirement for notice of the equitable assignment to be given to the trustee of the liability. Notice is however useful to the extent that it puts the trustee on guard as to the change of rights affecting the chose and may prevent him from settling in favour of the assignor instead of the assignee.

It also makes the trustee liable to the assignee where he settles in favour of the assignor in spite of the notice given to him. Again, while the assignee generally takes subject to any prior equities affecting the chose, giving notice ensures that he would not be affected by any subsequent equities.

Most importantly, notice allows the assignee to establish the priority of his interest in consequence of the rule in DEARLE v HALL.

An equitable assignment of a chose in action has bearing on the manner in which the rights can be enforced in a court of law. The effect here is largely dependent on whether the chose in question is a legal or equitable chose and if the chose was absolutely assigned or not.

Where the assignment concerns a legal chose, the assignee cannot assert his title over the property in his own name. He must join the name of the assignor either as co-plaintiff, where he agrees, or as a defendant. Where the chose is equitable though, the assignee can sue in his own name.

An assignment is absolute when the assignor transfers his whole interest in the chose to the assignee. It is however non-absolute where it is made subject to some condition at the happening of which it would become inoperable or where only a charge is made on the chose, in favour of the assignee.

In this instance, only a part of the assignor’s interest is transferred. The effect of this is that in situations where the transfer was absolute, the assignee would be able to sue in his own name. Where it is not absolute however, he must join the assignor before he can enforce his rights over the chose.

Where the chose is legal though, it is immaterial whether it is absolute or not, the assignee must join the assignor.

Legal Assignment

The Common law rule against assignment of choses in action was only lifted in 1875 and this was via the provision of the Judicature Acts, particularly S. 25(6) . This provision is impari materia with S. 150(1) Property and Conveyancing Law .

The purport of those provisions is that there can be absolute assignments by writing of any debt or other legal thing in action when express notice in writing has been given to the trustee of the liability. Also, it shall be effectual to transfer the legal right to sue in respect of such thing, along with the legal and other remedies in respect of it and the power to give a good discharge for the chose without the assignor’s permission.

The provisions clearly contain ingredients that would make a legal assignment valid and these include the following:

• The assignment must be in writing and signed by the assignor.
• It must be in respect of some existing debt or other legal thing in action and this includes equitable choses in action.
• It must be absolute.
• There must be an express notice in writing given to the debtor, trustee, or other person from whom the assignor would have been entitled to receive the debt or claim the thing in action.

The assignment takes effect from the date that notice is given. Failure to give notice at all or failure to give it in writing or failure to even execute the writing in the first place will not invalidate the assignment.

Rather, it becomes an equitable assignment instead of a legal one. Further, there is no requirement for consideration here.

The position at Common law before the Act amended it was that the assignee had no right independent of the assignor’s and was obligated to sue in the assignor’s name if he wanted to enforce his rights over the chose.

The Acts have however changed this and the assignee no longer needs to sue in the name of the assignor. He can sue all by himself.

Author: Opeoluwa Sanni

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2 thoughts on “ Assignment of Choses in Action ”

Your really hoshmeasures sir thankx

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The Law Dictionary

Your Free Online Legal Dictionary • Featuring Black’s Law Dictionary, 2nd Ed.

EQUITABLE ASSIGNMENT Definition & Legal Meaning

Definition & citations:.

A result that falls short of meeting the requirements of a legal assignment, yet, in the interest of fairness and justice, will be enforced by the courts, and documented as valid.

This article contains general legal information but does not constitute professional legal advice for your particular situation. The Law Dictionary is not a law firm, and this page does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

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